Sunday 13 May 2012

Economic Outlook- Greek sparks off Economic Woes again

In view of the recurring economic turmoil from Europe, risk of holding on to non-dividend yield stocks increases drastically. (Note: Non-dividend yield stocks tend to rise and fall drastically relative to dividend yield stock which are more defensive in nature) It leads to a re-assessment of whether I should hold or sell off (i) OCBC; (ii) OUE and (iii) Wilmar. Wilmar as per the last entry gave a significant upside potential due to it's current low price hence to keep and wait for price rebound. OCBC just announced it's quarterly and numbers still going strong while OUE seems to be in a perpetual limbo state. Conclusion is to keep OCBC and Wilmar and sell off OUE to mitigate market risk.

Wilmar disappointing first quarter result1Q12.

Extract of Wilmar's announcement on SGX: 

"Singapore, May 10, 2012 – Wilmar International Limited (“Wilmar” or “the Group”),
Asia’s leading agribusiness group, posted a 34% decrease in net profit to US$255.9
million for the quarter ended March 31, 2012 (“1Q2012”). The decline in net profit was
largely due to lower Oilseeds & Grains margins. However, the Group enjoyed robust
earnings growth from Palm & Laurics, Consumer Products and Plantations & Palm Oil

Interestingly, many analysts and investors claimed that they were extremely disappointed with the results which falls below their expectation. Hence the share prices plummet from S$4.80 to S$4.060 within 2 days.....a billion dollar written off market capitalization....oouch!

Once I saw the price at S$4.070, it became a no brainer and I immediately bought 1 more lot of Wilmar on 11 May 2012 (Friday). Market overreacted over the Oilsees and Grains decline as well as loss from sugar processing. True enough, the price rebounded upwards to close off at S$4.140. Should price drop below S$4.00, it may be time to accumulate more Wilmar stocks.

Analysts revised beta due to lower margin to increase risk profile. Targeted price range from S$4.60 to S$4.85 according to these experts. My own analysis points towards S$5.20. Anyway, think that the probability of upside seems greater at this one year all time low price of as low as S$4.060.